Carbon offsets to be capped at 50 pct in EU: source

BRUSSELS (Reuters) - European Union industries will be able to use carbon offsets to cover no more than half their emissions cuts under the bloc's carbon market from 2013, a source close to EU talks said on Wednesday.

The market is the flagship for the EU's climate policy, forcing industrial polluters to buy carbon emissions permits above a certain limit. Some member states are worried a proposed revamp will impose crippling costs on business entering a recession.

Companies can cut these costs by buying cheap carbon offsets from developing countries, funding emissions cuts there instead under a Kyoto Protocol clean development mechanism (CDM).

The import limit has been one hot topic in talks on a wider climate and energy package due for final agreement next month.

"We're very close to a final agreement on the issue of CDM," said the source, following late night talks between EU member states and parliament.

"An absolute maximum of 50 percent of the effort will be achievable through the CDM, and that will be coupled with clearly defined quality criteria."

It was uncertain what the limit would imply for the absolute amount of offsets permissible into the EU emissions trading scheme from 2008-2020.

Shipping would be included in the scheme from 2013 if no international agreement were reached by then on curbing greenhouse gas emissions from ships, the source added.

(Reporting by Pete Harrison, Editing by Peter Blackburn)